Nestlé’s recent announcement to stop buying palm oil from Indonesia’s Sinar Mas group represents a clear victory for Greenpeace.

The environmental group has been waging a campaign to curb the unsustainable production oil palm, of which nearly half of the world’s supply is grown in is this country.

Last week the food giant, declared its intention to exclude all companies “owning or managing high-risk plantations or farms linked to deforestation” from its supply chain.

Oil palm plantations are seen by conservationists as one of the major causes of the disappearance of Indonesia’s tropical forests, which are being cleared at a record rate.

A key consequence of this deforestation is that the country is now the world’s fourth largest global emitter of greenhouse gases.

In spite of there being more than 15 million hectares of degraded land suitable for plantation development, oil palm estates continue to push into so-called High Conservation Value Forests.

Greenpeace estimates that deforestation is actually responsible for one-fifth of the planet’s total carbon emissions, which is more than is produced by all cars, trucks and planes combined.

In addition to reducing crucial absorption of C02, deforestation is destroying the habitat of the orangutan as well as pushing many other endangered species to the brink of extinction.

For Nestlé, which manufactures some of the world’s most popular food brands, its announcement must come as a relief to those responsible for managing the reputation of the Swiss-based grocery product conglomerate.

The manufacturer of the likes of Kit Kat, Aero and Quality Street has been under fire for months, with Greenpeace asserting that its palm oil was being harvested unethically.

Controversy associated with the use of palm oil is by no means unique to Nestlé. It is now an almost ubiquitous ingredient for the food industry and is used in most cosmetics and bathroom products like soap and shampoo.

Greenpeace had targeted many large companies, but Nestlé dragged its feet, promising only to comply with its obligations to meet the standards of the Round Table on Sustainable Palm Oil (RSPO), of which it is a member.

The environmental group uploaded a derisory video about Nestlé on the popular YouTube website, which the company managed to remove, but only after millions had seen it.

Then activists began invading Nestlé’s official Facebook page, posting lists of Nestlé products containing palm oil to boycott and generally expressing their profound disapproval.

Although the company is no stranger to calls for boycotts, this is arguably one of the first campaigns that so extensively used the Internet and particularly social media.

Last week, Nestlé declared it would work with the Geneva-based Forest Trust to effect change in its palm oil harvesting policies.

The Forest Trust is a respected non-for-profit group that helps companies source forest products in an environmental and socially responsible manner.

But while the announcement provided a welcome respite for Nestlé, it has surely brought on a most unwelcome headache for the Sinar Mas group.

As an active participant in the RSPO, the company has argued it produces palm oil in a responsible manner.

And until last week, Nestlé asserted its right to buy from any oil palm supplier that followed RSPO sustainability rules.

But Nestlé’s climb down marks a major shift in the way companies using oil palm must manage their chains of custody if they want to be protected from accusations of being unethical; for it seems they can no longer rely on suppliers’ RSPO membership alone.

On its website, PT Smart, the Sinar Mas subsidiary at the center of the row, states that it “exists to provide, in the best way possible, the needs of our customers”. Having suffered the loss of an important customer because of Greenpeace accusing the company of breaking the RSPO rules, it must be high time for this company to get smart.

In spite of their strong denial of any deviation from the RSPO environmental criteria, PT Smart’s products have been painfully rejected by a high profile corporation that has succumbed to environmentalist pressure.

Nestlé’s announcement effectively implies its acknowledgment that it now must go beyond RSPO compliance.

PT Smart should now be seriously considering how it might expand its operations on degraded land, by asking the Indonesian government to exchange the concessions it has been given for palm oil production in forested areas for ecologically insignificant places on which to develop new plantations.

The World Resources Institute (WRI) has recently established the Palm Oil, Timber & Carbon Offsets (POTICO) program in Indonesia, which aims to help companies like PT Smart set up such land swaps.

Designed to curb new oil palm plantations from encroaching on virgin forests, POTICO will help to expand the Indonesian oil palm industry sustainably, conserve the nation’s biodiversity and enhance the sustainable livelihoods of local people

The WRI’s POTICO initiative will help companies divert planned oil palm plantations onto degraded lands and bring the forests that were slated for conversion into sustainable management, thereby supporting the President in fulfilling his CO2 emission reduction promises.

As the world’s largest producer, having recently exceeded Malaysia, oil palm is vital to the expansion of the Indonesian economy.

It’s therefore equally as vital the government does everything in its power to enhance the credibility of the industry and avoid further damaging accusations against palm oil plantation operators.

There are lessons to be learnt from this controversy that should benefit the oil palm industry, its customers and the nation’s ecologically rich forests.

Jonathan Wootliff leads the Corporate Accountability practice at the consulting firm, Reputation Partners. He specializes in sustainable development and in building of productive relationships between companies and NGOs. He can be contacted at jonathan@reputationpartners.com.

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